1
EXHIBIT 8.1
________________, 1999
Farmers & Merchants Bank
2011 Highway 47 North
White Bluff, TN 37187
Re: Certain Tax Opinions with Respect to Certain Federal Tax
Consequences of the Referenced Transactions
Ladies and Gentlemen:
We have acted as counsel to Farmers & Merchants Bank, a Tennessee
banking corporation ("FMB"), in connection with a merger of FMB with and into
First Farmers and Merchants National Bank, Columbia, a national banking
association ("FFMNB"), with FFMNB as the surviving corporation. In exchange for
their shares of stock of FMB, the shareholders of FMB will receive shares of
stock of First Farmers and Merchants Corporation, a Tennessee corporation
("FFMC"), the parent corporation of FFMNB, plus cash in lieu of fractional
shares. FMB has requested that Baker, Donelson, Bearman & Caldwell furnish its
opinion, among other things, on whether the proposed transaction constitutes a
tax-free reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code").
I. FACTS, REPRESENTATIONS AND ASSUMPTIONS
Pursuant to the terms of the Agreement and Plan of Merger, dated as of
October 26, 1998, as amended on December 15, 1998 (the "Agreement"), by and
among FFMC, FFMNB and FMB, each as will be described in an FMB Prospectus/ Proxy
Statement (substantially in the form as included as Part I of the Registration
Statement to which this opinion is an exhibit) (the "Proxy Statement"), FFMNB
will acquire all of the assets and will assume all of the liabilities of FMB in
a merger in which FMB will merge with and into FFMNB with FFMNB being the
surviving corporation (the "Merger").
In the exchange occurring in connection with the Merger, FMB
shareholders (the "FMB shareholders") will exchange their respective shares of
FMB stock for FFMC's stock as follows: each issued and outstanding share of FMB
common stock, par value $100.00 per share ("FMB Common Stock"), shall be
converted into, and become exchangeable for, the right to receive the number of
shares of validly issued, fully paid and nonassessable shares of FFMC common
stock, par value $10.00 per share ("FFMC Common Stock") set forth in the
Agreement.
2
No certificates or scrip for fractional FFMC Common Stock shall be
issued upon the surrender for exchange of FMB Common Stock. FFMC shall make cash
payments in lieu of such fractional shares equal to such fraction multiplied by
$46.00.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
various documents referenced in this letter, including, without limitation, the
Agreement, the Proxy Statement and such other documents as we have deemed
necessary or appropriate in order to enable us to render the opinions below. In
our examination, we have assumed the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents submitted
to us as certified, conformed or photostatic copies and the authenticity of the
originals of such copies. In rendering the opinion set forth below, we have (i)
assumed that the Merger will be effected in accordance with the Agreement and
(ii) relied upon certain written representations and covenants of FFMC, FMB and
Controlling Shareholders, which are annexed hereto, and have assumed that those
representations and covenants will be true on the Effective Time. We have not
attempted to verify independently any of the foregoing representations,
assumptions and statements.
In rendering our opinion, we have considered the applicable provisions
of the Code, Treasury Regulations, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service and such other authorities as we have
considered relevant.
II. OPINIONS
Subject to the various assumptions, limitations and qualifications set
forth herein and based upon the facts and factual representations set forth
herein, as of the time of the closing of the Transaction, we are of the opinion
that, under current law:
(i) The Merger will constitute a reorganization within
the meaning of Section 368(a) of the Internal Revenue
Code.
(ii) No gain or loss will be recognized by holders of FMB
stock who exchange all of their FMB Common Stock
solely for FFMC Common Stock (except for cash
received in lieu of fractional shares) in the Merger.
(iii) The tax basis of the FFMC Common Stock received by
holders of FMB Common Stock who exchange all of their
FMB Common Stock solely for FFMC Common Stock in the
Merger will be the same as the tax basis of the FMB
Common Stock surrendered in exchange for the FFMC
Common Stock (reduced by an amount allocable to a
fractional share interest in FFMC Common Stock for
which cash is received).
(iv) The holding period of the FFMC Common Stock in the
Merger will be the same of the holding period of the
FMB Common Stock surrendered in exchange therefore,
provided that such FFMC Common Stock is held as a
capital asset at the Effective Time.
This opinion may not be applicable to stockholders subject to special
treatment under U.S. federal income tax law (including, for example, non-U.S.
persons, financial institutions, dealers in securities, insurance companies,
tax-exempt entities, holders who acquired FMB Common Stock pursuant to the
exercise of an employee stock option or right or otherwise as compensation, and
holders who hold FMB Common Stock as part of a hedge, straddle or conversion
transaction).
3
Except as set forth above, we express no opinion as to the tax
consequences whether federal, state, local or foreign, to any part to the Merger
or as to any other transactions related to the Merger or contemplated by the
Agreement.
This opinion is being furnished to you only in connection with the
Merger and solely for your benefit in connection therewith and may not be used
or relied upon for any other purpose and may not be circulated, quoted or
otherwise referred to for any other purpose without our express written consent,
except that we do consent to the use of this opinion as an exhibit to the
Registration Statement on Form S-4 being filed by FFMC in connection with the
Agreement, and to the references to us under the caption "THE MERGER - Certain
Federal Income Tax Consequences" and elsewhere in the Proxy Statement. In giving
such consent we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
Very truly yours,
Baker, Donelson, Bearman & Caldwell